This Week in Review 10/5/2020

One who conquers the sea today is ready to conquer the ocean tomorrow. ~ Matshona Dhliwayo

Stocks finished a volatile week higher despite the announcement by the president that he and the first lady tested positive for the coronavirus. What appears to be a resurgence in COVID-19 cases was also evident in the weaker-than-expected jobs report. Wall Street held on to its gains on the hope that a compromise could actually be reached on the elusive stimulus package.

Although markets were higher on the week, September held on to its reputation as a disappointing month and we ended a five-month winning streak.

The Dow Jones Industrial Average was up 1.9% on the week to close at 27,682.81.

The S&P 500 ended the week at 3,348.42, advancing 1.5%. This was the first weekly advance for the broad market in a month.

The NASDAQ also gained 1.5% last week to end at 11,075.02.

The Russell 2000 had an outstanding week, gaining 4.4% to close at 1539.29, but remains down 7.7% YTD.

Prior to Friday, the market had already established the week's gains, largely on technically-oriented trading activity in oversold stocks. Early in the week, cyclical stocks benefited from M&A activity, better-than-expected economic data (although less consequential reports), analyst upgrades, and stimulus optimism. 

The mega-caps also participated in the rebound, with the market shaking off any residential weakness that followed the first presidential debate on Tuesday. Friday, however, is when the real news flowed in and the mega-caps sold off to end the week. 

The announcement that President Trump and the First Lady tested positive for COVID-19 took most of the wind out our sails after a very nice week. September nonfarm payrolls increased by 661,000 (consensus 800,000), and there were indications that a fiscal relief bill could soon be reached. The latter remains to be seen, but value/cyclical stocks did benefit from the hopeful-sounding reports. 

Highlighting other key economic reports, weekly jobless claims remained elevated at 837,000 (consensus 850,000), personal income declined 2.7% m/m in August (consensus -2.0%), and the ISM Manufacturing Index for September decelerated to 55.4% (consensus 56.0%) from 56.0% in August. _{(Source: Briefing.com)}

Market Update…

• Oil Prices - West Texas Intermediate crude futures finished at $37.05 a barrel. WTI has now been lower four of the past five weeks amid concerns of demand as the global cases of coronavirus continue to rise.
• Gold - Gold increased in a "flight to safety" trade and closed out the week at $1,907.60 an ounce.
• U.S. Dollar - U.S. dollar inched higher last week.
• U.S. Treasury Rates - The yield on the benchmark 10-year Treasury finished the week a bit higher at 0.69%.
• Asian shares were mostly higher in overnight trading.
• European markets are trading in the green.
• Domestic markets are also trading up this morning.

Wall Street will focus its attention squarely on Washington this week. The health of the president and the negotiations in Congress regarding another aid package will take precedence over any economic reports.

There is a sense of a growing disconnect between the markets and the raging politics. No doubt the former has a better tone than the latter. 

As we get closer and closer to the election, we see volatility remaining high.

Stay healthy and have a great week!